Today’s mortgage and refinance rates
Average mortgage rates climbed at a dizzying pace yesterday. And they’re higher than they were this time last week by an appreciable amount. But the distinguishing characteristic of the current rate environment is volatility. And we’ve seen record or near-record rises and falls over the last couple of weeks.
What happens to mortgage rates next week will largely depend on Wednesday’s consumer price index (CPI). If that suggests inflation is plateauing or cooling, mortgage rates might fall. But if it shows prices surging higher, those rates might rise. Since I don’t know what the report will say, I can’t sensibly forecast where those rates will head.
Current mortgage and refinance rates
|Conventional 30 year fixed||5.554%||5.588%||+0.3%|
|Conventional 15 year fixed||4.961%||5.016%||+0.24%|
|Conventional 20 year fixed||5.703%||5.759%||+0.46%|
|Conventional 10 year fixed||5.106%||5.205%||+0.27%|
|30 year fixed FHA||5.535%||6.266%||+0.24%|
|15 year fixed FHA||5.137%||5.623%||+0.16%|
|30 year fixed VA||5.144%||5.363%||+0.34%|
|15 year fixed VA||5.054%||5.419%||+0.13%|
|Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.|
Should you lock a mortgage rate today?
Don’t lock on a day when mortgage rates look set to fall. My recommendations (below) are intended to give longer-term suggestions about the overall direction of those rates. So, they don’t change daily to reflect fleeting sentiments in volatile markets.
This time last week, I revised my rate lock recommendations (below). I remain uncertain that was the right move. But I’m not yet ready to change them back.
Why? Because signs of a global recession, which would almost inevitably engulf the US, grow stronger by the day. And a recession would be good for mortgage rates, though very little else. Meanwhile, most economists expect next Wednesday’s CPI report to show the pace of price rises slowing: continuing higher but less quickly. Again, that should normally help mortgage rates. But how much do you trust economists?
So, for now, my personal rate lock recommendations remain:
- LOCK if closing in 7 days
- LOCK if closing in 15 days
- FLOAT if closing in 30 days
- FLOAT if closing in 45 days
- FLOAT if closing in 60 days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So let your gut and your personal tolerance for risk help guide you.
What’s moving current mortgage rates
I very much doubt that there’s ever been such a volatile period for mortgage rates. Of course, periods of volatility are to be expected. But we’re currently seeing those rates rising by record or near-record amounts, falling as precipitously and then rinsing and repeating — all within a matter of days.
Seriously, this is not normal. Of course, most of the extreme ups and downs cancel each other out. But mortgage rates ended this week appreciably higher than they started it. But they’re lower than they were a month ago.
Recession vs. inflation — The great tug of war
When it released this week’s rates report, Freddie Mac talked about “the tug of war between inflationary pressures and a clear slowdown in economic growth.” That’s a theme I’ve been covering constantly here for many weeks.
Investors can’t make up their minds whether they’re more afraid of a recession or inflation. And the big swings we’ve seen in mortgage rates recently are them trying to make up their minds.
Recessions tend to drag mortgage rates lower while inflation tends to push them higher. But economic data are currently confusing because, taken as a whole, they — and especially yesterday’s spectacularly good jobs report — suggest that a recession is more distant than the mood in bond markets suggests. (Mortgage rates are largely determined by the yield on a type of bond called a mortgage-backed security.)
Meanwhile, investors think inflation should be easing off while recent data suggest it isn’t. Small wonder we’re seeing hair-trigger reactions to news and rumors.
The Federal Reserve
All this is complicated by the Federal Reserve’s role in mortgage rates. Theoretically, it doesn’t have one. It’s those mortgage-backed securities (MBSs) that are the biggest influence on those rates. But, in practice, the Fed hugely affects all markets, including the one for MBSs.
Until yesterday, many expected the Fed’s monetary policy committee (the Federal Open Market Committee or FOMC) to hike its rates on Sept. 21, after its next meeting, by a smaller amount than the 75-basis-point (0.75 percentage points or 0.75%) increases seen in June and July. But Friday’s exceptionally strong jobs report means another big rise might be back on the table.
Here’s The Wall Street Journal’s (paywall) take yesterday, under the headline, “Jobs Report to Keep Fed on Aggressive Tightening Path”:
The July jobs report defied expectations of an economic slowdown and will make it harder for the Federal Reserve to dial back the pace of rate increases at its meeting next month.
Next Wednesday’s inflation report
We should probably assume that the FOMC isn’t sadistic and won’t hike rates excessively unless it has to. And that means next Wednesday’s consumer price index might act as the antidote to the poison (for mortgage rates) of yesterday’s job figures.
The Fed will certainly implement some rate increase next month. It’s already said that it will want to see multiple months of evidence that prices are cooling before it eases off its anti-inflation measures. But maybe it won’t be as aggressive in its hike if that CPI report is as good as many economists hope.
According to the consensus forecast of economists polled by MarketWatch, CPI is expected to rise 0.3% in July, compared with 1.3% in June. That could be great for mortgage rates. But be aware that economists have recently been overly optimistic when forecasting inflation. And, of course, a worse-than-expected figure could be bad for mortgage rates.
Get the point and save big bucks!
Mortgage News Daily (MND) highlights that the way the MBS market is structured currently amplifies movements in mortgage rates. But that same structure is also throwing up a hugely important anomaly at the moment that could save you a lot of money. MND says:
” … there’s really not nearly as much difference between a mortgage rate of 4.99% and 5.5%+ as history would suggest. In the past, those two rates would typically be separated by at least 2 points. At present, it’s less than 1 in most cases. This not only makes for more volatility in day-to-day rate tracking, but it also means that rate quotes are more diverse as some lenders advertise with points while others do not.”
What does that mean for you? Well, if you can scrape together enough money to purchase a single discount point (1% of your loan’s value) on closing, that might buy down your 5.5%+ rate to 4.99%. Talk to you lender to find out if that applies in your case. And, if it does, I’d beg, borrow or steal (all right, not steal) to grab that offer, if I were you.
Economic reports next week
Wednesday’s consumer price index dwarfs all the other economic reports next week. I explained why earlier. But there are several other inflation indicators over the next seven days and markets may pay attention to all of them.
Critical reports in the following calendar are shown in bold. Other reports next week are unlikely to move markets much unless they contain shockingly good or bad data.
- Tuesday — Unit labor costs and productivity for the second quarter. Plus July’s small business index from the National Federation of Small Business
- Wednesday — July consumer price index.
- Thursday — July producer price index. Plus weekly new claims for unemployment insurance to Aug. 6
- Friday — July import price index. Plus August consumer sentiment index
It’s inflation reports from Tuesday on. But the CPI is the big one.
Mortgage interest rates forecast for next week
Once again, I can’t provide a forecast of where mortgage rates will head next week. There’s simply too much volatility and uncertainty. And I don’t know what Wednesday’s CPI report will say.
Mortgage and refinance rates usually move in tandem. And the scrapping of the adverse market refinance fee last year has largely eliminated a gap that had grown between the two.
How your mortgage interest rate is determined
Mortgage and refinance rates are generally determined by prices in a secondary market (similar to the stock or bond markets) where mortgage-backed securities are traded.
And that’s highly dependent on the economy. So mortgage rates tend to be high when things are going well and low when the economy’s in trouble. But inflation rates can undermine those tendencies.
But you play a big part in determining your own mortgage rate in five ways. And you can affect it significantly by:
- Shopping around for your best mortgage rate — They vary widely from lender to lender
- Boosting your credit score — Even a small bump can make a big difference to your rate and payments
- Saving the biggest down payment you can — Lenders like you to have real skin in this game
- Keeping your other borrowing modest — The lower your other monthly commitments, the bigger the mortgage you can afford
- Choosing your mortgage carefully — Are you better off with a conventional, conforming, FHA, VA, USDA, jumbo or another loan?
Time spent getting these ducks in a row can see you winning lower rates.
Remember, they’re not just a mortgage rate
Be sure to count all your forthcoming homeownership costs when you’re working out how big a mortgage you can afford. So focus on your “PITI.” That’s your Principal (pays down the amount you borrowed), Interest (the price of borrowing), (property) Taxes, and (homeowners) Insurance. Our mortgage calculator can help with these.
Depending on your type of mortgage and the size of your down payment, you may have to pay mortgage insurance, too. And that can easily run into three figures every month.
But there are other potential costs. So you’ll have to pay homeowners association dues if you choose to live somewhere with an HOA. And, wherever you live, you should expect repairs and maintenance costs. There’s no landlord to call when things go wrong!
Finally, you’ll find it hard to forget closing costs. You can see those reflected in the annual percentage rate (APR) that lenders will quote you. Because that effectively spreads them out over your loan’s term, making that higher than your straight mortgage rate.
But you may be able to get help with those closing costs and your down payment, especially if you’re a first-time buyer. Read:
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The result is a good snapshot of daily rates and how they change over time.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.